BILL ANALYSIS Ķ SENATE COMMITTEE ON TRANSPORTATION AND HOUSING Senator Jim Beall, Chair 2015 - 2016 Regular Bill No: SB 9 Hearing Date: 4/28/2015 ----------------------------------------------------------------- |Author: |Beall | |----------+------------------------------------------------------| |Version: |4/15/2015 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Eric Thronson | |: | | ----------------------------------------------------------------- SUBJECT: Greenhouse Gas Reduction Fund: Transit and Intercity Rail Capital Program DIGEST: This bill makes a number of significant changes to the Transit and Intercity Rail Capital Program, including recasting the program's mission to fund large, transformative projects and restricting 90% of the funding to projects with a total cost of $100 million or more. ANALYSIS: The Legislature enacted AB 32 (Nuņez, Chapter 488), the Global Warming Act of 2006, which requires the California Air Resources Board (ARB) to establish a statewide greenhouse gas (GHG) emissions limit such that by 2020 California reduces its GHG emissions to the level they were in 1990. The Cap-and-Trade Program is one of ARB's key AB 32 implementation programs. Under this program, ARB establishes an overall limit - or "cap" - on GHG emissions from specified industries. As part of the Cap-and-Trade Program, ARB auctions off GHG emission allowances as mitigation fees. To date, ARB has completed 10 auctions, taking in a total of $1.6 billion in proceeds. These funds may only be used to facilitate the achievement of GHG emission reductions in California consistent with AB 32. In 2014, the Legislature enacted SB 862 (Committee on Budget and Fiscal Review, Chapter 36), a budget trailer bill which establishes a long-term cap-and-trade expenditure plan by continuously appropriating portions of the funds for designated SB 9 (Beall) Page 2 of ? programs or purposes. One of these programs is the Transit and Intercity Rail Capital Program (TIRCP), to which SB 862 commits 10% of the annual cap-and-trade revenues. Existing law specifies that the TIRCP fund both capital improvements and operational investments in order to modernize California's intercity, commuter, and urban rail systems as well as achieve the following specific policy goals: 1)Reduce GHG emissions 2)Expand and improve rail service to increase ridership 3)Integrate various rail operators' systems, including high-speed rail 4)Improve rail safety Existing law appropriates the funds to the California Transportation Agency, and assigns the Transportation Agency with the responsibility of evaluating funding applications and adopting a list of projects. Prior to commencing the program, the Transportation Agency is required to develop draft program guidelines containing selection criteria. Finally, existing law requires the California Transportation Commission (CTC) to award grants pursuant to the list of projects chosen by the Transportation Agency. In evaluating project applications, SB 862 requires the Transportation Agency to consider: 1)Specified cobenefits, including: Reduction of auto vehicle miles traveled Promotion of housing development near rail stations Expansion of existing rail and transit systems Implementation of clean-vehicle technology Promotion of active transportation Improvements to public health 1)Whether the project was developed through the collaboration of two or more rail operators 2)Geographic equity 3)Consistency with the adopted sustainable communities strategies and the recommendations of regional agencies Finally, existing law establishes a programmatic goal for the SB 9 (Beall) Page 3 of ? TIRCP to provide at least 25% of available funding to projects that provide a direct, meaningful, and assured benefit to disadvantaged communities. This bill makes a number of significant changes to the TIRCP, including: 1)Recasting the TIRCP mission to focus on large, transformative capital improvements and eliminating operations funding as an eligible use of the funds. 2)Specifying that the Transportation Agency dedicate 90% of the funds to projects with a total cost of $100 million or more, and 10% to projects costing less than $100 million. 3)Adding evaluation criteria, including: Reducing the number of auto trips Enhancing connectivity and coordination of all transit in a region Providing direct connectivity to the proposed high-speed rail system The extent to which a project reduces GHG emissions The extent to which a project leverages other sources of funding 1)Creating a process by which the Transportation Agency adopts a five-year estimate of available revenues for the TIRCP and an accompanying program of projects. 2)Enabling the Transportation Agency to enter into multi-year funding agreements with eligible applicants. 3)Expanding eligible applicants from only rail-system operators to include bus systems as well. 4)Setting up a process by which a grant recipient can receive what is called a Letter of No Prejudice (LONP) from the Transportation Agency, which enables the recipient to spend alternative funds on a project with the promise of future reimbursement from cap-and-trade revenues. COMMENTS: 1)Purpose. According to the author, the Legislature created the TIRCP within the cap-and-trade framework to fund transit SB 9 (Beall) Page 4 of ? projects, which are critical to reaching California's environmental and economic goals for the future. The author contends that large-scale transit expansion projects would result in the "biggest bang for the buck" when it comes to reducing GHG emissions because they add significant capacity to existing public transit systems operating in heavily congested, urbanized areas with high concentrations of pollutants. This additional transit capacity is essential to accommodate substantial ridership growth that would result in a shift from solo driving to public transit. The author believes this mode shift needs to occur in order to reduce vehicle miles traveled and, thus, GHG emissions. Proponents of the bill argue, however, that the TIRCP is not structured in a way that would allow it to accommodate large-scale transit expansion projects that need a more sizable amount of cap-and-trade dollars in order to be built. This bill seeks to address this issue by incorporating into the TIRCP a number of concepts that have been successfully used for other state and federal transportation funding programs that have the ability to allocate resources to large-scale projects, such as the state Traffic Congestion Relief Program, the State Transportation Improvement Program, and the federal New Starts Program. 2)Existing TIRCP guidelines. As previously stated, SB 862 requires the Transportation Agency, through a public process, to develop guidelines for the TIRCP before soliciting applications for funding. These guidelines were released February 6, 2015. The Transportation Agency is now in the process of evaluating applications and awarding grants to applicants for the 2015-16 fiscal year. The adopted guidelines state that the Transportation Agency "intends to fund a small number of transformational projects that improve the statewide transportation network." The guidelines also state, however, that no single project may exceed 33% of available funds in any given year. For the upcoming fiscal year, in which $25 million is available for the TIRCP, that would mean the Transportation Agency will make no award more than $8.3 million. It is unclear how such a small amount of money can contribute much to a transformational project. In future years, if the SB 9 (Beall) Page 5 of ? Transportation Agency retains its 33% restriction and the available funding increases as expected, grants may grow to roughly $60-70 million. Even that much, however, in one year may not be enough to make a significant contribution to a truly transformational project. 3)Problems this bill tries to address. One problem with the existing TIRCP guidelines is that large, transformative projects which this program is trying to target are likely to cost billions of dollars and take years, even decades, to complete. A one-time influx of money may be helpful, but the nature of these long-term projects requires a long-term commitment in order to ensure completion of the project (and the requisite GHG emission reduction). This bill sets in place a system in which the Transportation Agency can make a multi-year commitment to a project and therefore have an impact in the type of project the Transportation Agency envisions funding. In addition, the existing guidelines state that the extent to which these funds would be used to leverage funding from other sources will be considered in the evaluation process. Larger projects tend to leverage the most state and federal funds, but those funding programs typically require all funding to be identified before awarding grants. This bill enables projects to qualify for various funding streams through the multi-year commitment process as well as the LONP option. Finally, this bill seeks to resolve a few apparent oversights in SB 862. First, existing law is ambiguous about what phases of project development are eligible for funding, although the TIRCP guidelines state that phases other than construction or implementation are eligible. This bill clarifies existing law to state that all phases of project development are eligible for funding. Second, this bill inserts into existing law an obvious requirement laid out in the TIRCP guidelines: applicants should identify the funding sources and approach to ensure ongoing operation of any new transit service created through this program. Finally, while the TIRCP guidelines state that bus rapid transit projects are eligible for funding, existing law clearly alludes to rail projects as the focus of the program. This bill clarifies that bus systems are eligible recipients. The committee may wish to consider amending the bill to not only include bus systems, but ferries as well. SB 9 (Beall) Page 6 of ? 4)Who should administer the TIRCP? As stated previously, existing law assigns the Transportation Agency the responsibility of adopting guidelines and administering the TIRCP. The TIRCP created in existing law resembles to some degree the Active Transportation Program in which the CTC awards annual grants to applicants for active transportation projects. As envisioned in this bill, the TIRCP would resemble a state program like the STIP, which is a multi-year schedule of primarily road and highway expansion projects. In both of these instances, the CTC develops and adopts the guidelines, administers the programs, and oversees the distribution of the funds. In fact, CTC is the agency responsible for all such transportation programs. It is unclear why the Transportation Agency has hired staff and developed expertise to administer the TIRCP and other similar transportation programs when the CTC already has the expertise and agency structure to do this work. 5)Opposition. TransForm, an organization dedicated to sustainable and equitable transportation and land-use policies, opposes this bill because they fear the changes this bill makes to the TIRCP will eliminate from eligibility many projects within disadvantaged communities that might otherwise qualify for funding. As noted previously, existing law requires that at least 25% of available funding for the TIRCP must benefit disadvantaged communities. Supporters of this bill point out that this bill does not change the existing requirement and, therefore, the Transportation Agency must be able to demonstrate that the selected TIRCP projects provides benefits to disadvantaged communities. In fact, the TIRCP guidelines note, "The highest rated applications that meet the program objectives will be selected for programming, except that the Transportation Agency may make adjustments to meet the disadvantaged community goals of this program and provide geographic equity." Related Legislation: SB 862 (Committee on Budget and Fiscal Review, 2014) - established a long-term cap-and-trade expenditure plan by continuously appropriating portions of the funds for designated programs or purposes. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes SB 9 (Beall) Page 7 of ? Local: No POSITIONS: (Communicated to the committee before noon on Wednesday, April 22, 2015.) SUPPORT: City of San Jose Northern California Carpenters Regional Council Santa Clara Valley Transportation Authority Silicon Valley Leadership Group OPPOSITION: TransForm -- END --